Abstract
Energy economists are interested in how a change in electricity prices prompts a response by way of end-user power demand. It is difficult to estimate price elasticities statistically if historical prices are low and change infrequently, especially in the short run. This paper extends a previous analysis by Matar (2018) that explored the merger of a residential building energy model and a utility maximization component by incorporating more demand-reducing measures within a utility-maximization framework for households. The framework is informed by the physical equations that govern how electricity is consumed. The measures considered are:
- Independently adjusting the thermostat set-point in the spring and fall, and during the peak and off-peak hours in the summer.
- Turning off lights.
- Switching off consumer electronics.
The study calibrates the physical component for a dwelling in Saudi Arabia. Domestic electricity tariffs in the – tiered – progressive pricing structure were partially raised in 2018. In addition to those increases, the response to other electricity pricing schemes is analyzed: time-of-use and real-time prices. The paper shows that for a household with a low preference for electricity, the 2018 price increases do warrant an adjustment in indoor temperature in the hot summer months and lower electricity use for consumer electronics. For a typical dwelling in Saudi Arabia, the response measure that is most exercised is thermostat set-point adjustments. A subdued response is found for households that have adopted higher energy efficiency or have a high preference for electricity.
